Fannie Mae-No Politics (FNMA)

[Dollars1]

Bulls like PulteGroup into earnings
Mike Yamamoto | [e-mail]
PHM: SEE CHART GET CHAIN FIND STRATEGIES

PulteGroup attracted bullish option activity on Friday for the second time in less than a week, just a few sessions before the homebuilder reports earnings.

optionMONSTER's Heat Seeker system identified the purchase of 3,000 May 22 calls in less than 20 seconds, most of it in one print of 2,500 that went for the ask price of $0.84. Open interest in the strike was just 164 contracts before the trade occurred, showing that it is a new position.

This follows buying in the May 23 calls last Tuesday, part of what is known as a bullish roll. That was done by a investor who wants to stay positioned for a potential rally through the company's first-quarter results on Thursday morning.

Long calls lock in the price where the stock can be purchased, gaining if it rises and providing leverage to the underlying shares. But the contracts can quickly lose value if the stock stalls or pulls back. (See our Education section)

PHM slipped 0.67 percent to $22.19 on Friday, continuing to pull back along with other builders after U.S. housing starts and permits fell short of expectations in the previous session. The stock has been range-bound since its 52-week high of $23.36 in late February, when it saw call buying in the July contracts.

Friday's total option volume in the name was quadruple its daily average for the last month. Calls outstripped puts by a bullish 6-to-1 ratio.

Disclosure: I am long PHM.